MarketWatch.com - Pre-Market Indications

Monday, January 4, 2010

Two things helping the market today...the economic data and the calendar.

We got better data today on China manufacturing and on the U.S. ISM...that's a big help.

But the other factor is the calendar. Why? It's a New Year! You gotta put the money to work, you can't coast anymore.

Remember November-December? Talk about coasting! A lot of traders got out of the risk trade then, and the dollar rose, but it's time to end that. A new calendar means you've got to put that money to work.

Going back to buying commodities on a global growth story is the easy trade, and t hat is exactly what is being done today.

What's missing? Volume--it's anemic. But the action is definitely to the buyside...what action there is, is clearing coming from bidders.

The wildcard is the dollar...strong employment data Friday may well bring dollar strength...but a lot of traders are not afraid of that...the market showed in December that it can go up when the dollar goes up.

What stocks can stand when the dollar stabilizes or moves up? A lot, if the U.S. economic picture improves.

Elsewhere:

We've noted this strange dichotomy earlier: analysts are busy upgrading sectors like chemicals (Goldman Sachs) or refiners (Deutsche Bank) this morning, while economists meeting in Atlanta for the American Economic Association seem to be extremely pessimistic.

Look at Paul Kr ugman's comments in Atlanta:

1) he sees need for more stimulus because the current stimulus effect will fade at midyear, 2) unemployment likely to increase, 3) housing prices could drop another 5-10%, and 4) he sees a 30-40 percent chance of a double dip recession.

LONDON (MarketWatch) -- U.S. stock futures Monday pointed to a strong debut to 2010 as the Federal Reserve's top two officials hinted that interest rates would stay at ultra-low levels for months to come.

After a year that saw the Dow Jones Industrial Average climb 19% on a recovery in the economy and a stabilization of the financial sector, futures on the Dow industrials rose 54 points.

The gains came as Federal Reserve Chairman Ben Bernanke said in a speech Sunday that regulatory and supervisory policies, rather than monetary policy, were to blame for a rapid increase in U.S. house prices in the early parts of last decade, and Fed Vice Chairman Donald Kohn said that tightening policy to head off perceived threats from asset price increases "could be expensive."

"While we disagree with much of the content of the speeches, these comments should reiterate (yet again) that the Fed will not seek to tighten policy until economic slack is, or looks likely to be, significantly reduced and/or inflation expectations pickup," said a research note from RDQ Economics.

Overseas, China's manufacturing activity accelerated in December at its fastest pace in several years, according to data compiled by two competing industrial surveys. A similar gauge for Britain showed the quickest expansion in 25 months.

The Institute for Supply Management's December manufacturing index is due at 10 a.m. Eastern time, and is expected to show an increase to 54% from 53.6%, according to economists polled by MarketWatch. Construction spending data also are due for release.

Kraft Foods
/quotes/comstock/13*!kft/quotes/nls/kft
(KFT27.18,
0.00,
0.00%)
may be in the spotlight after two newspaper reports said it would increase its hostile offer for Cadbury
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(CBY51.39,
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, and an Italian newspaper said Ferrero has met with private-equity firms and Hershey
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(HSY35.79,
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about jointly launching a counter-offer.

The media sector may be in the spotlight after News Corp.'s
/quotes/comstock/15*!nws/quotes/nls/nws
(NWS15.92,
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Fox Network and Time Warner Cable
/quotes/comstock/13*!twc/quotes/nls/twc
(TWC41.39,
0.00,
0.00%)
reached a deal to keep the Fox broadcast network on the air over the Time Warner network. News Corp. also owns MarketWatch, the publisher of this report.

Wal-Mart Stores
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(WMT53.45,
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plans to cut costs by combining purchasing for several countries, according to a Financial Times report citing the head of Wal-Mart's U.S. stores, Eduardo Castro-Wright.

Commodity futures were strong, with oil futures climbing to around the $81-a-barrel mark and gold futures rising by $21 an ounce.

The dollar index fell 0.5%, while stocks in Europe and Asia rose, with the Nikkei 225 climbing 1% in Tokyo and the FTSE 100 up 0.7% in London.

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